Chinese banks sharply cut new lending in April after a record first-quarter credit spree, much of which appeared to go to the state sector and may have helped inflate asset bubbles in real estate and commodities.

According to the document seen by Reuters, the China Banking Regulatory Commission (CBRC) is requiring financial institutions to conduct checks on their implementation of central government directives intended to make it easier for private firms to access bank credit.

It also tells them to work to resolve any problems in cases where lending support to private enterprise is insufficient, including small and micro-businesses.

The document requires institutions to report their implementation results to the regulator by May 20.

The CBRC did not respond to calls seeking comment from Reuters.

The document also called for banks to reduce costs for short-term credit products such as bridge loans, which private firms rely on to stay afloat through tough business cycles, while examining risk in their loan guarantee businesses.

One of the people with direct knowledge of the order said the important part "is to implement State Council requests and notifications. The key points are areas where policy solutions have not been put into place, or measures have not been introduced, impacting private investment's stable and sustainable growth."

Private Investment Crucial

A broad measure of investment - fixed-asset investment - by private companies rose just 5.7 percent in the first quarter from a year earlier, a sharp slowdown from the pace of a year earlier.

Encouraging private investment is crucial for Beijing both because such investment tends to create more jobs and because such firms are seen as more efficient users of capital and more innovative in moving up the value chain.

That is in sharp contrast with the inefficient state-owned sector, which has struggled to produce positive returns on capital invested.

Data shows the proportion of private investment as a share of total social financing rose from 49.8 in 2012 to 64.2 percent in 2015.

The People's Daily published an interview on May 9 in which it cited an "authoritative person" saying excessive credit growth in China may lead to recession.

The article prompted speculation rift is growing within the government about how to best use credit to support growth. There are concerns that a return to state-dominated investment programs targeting infrastructure and property - like that launched in the aftermath of the global financial crisis - will saddle Chinese banks with even more bad debt.